2024 (1) TMI 117 - HC - Income Tax

Validity of faceless assessment - authorities have failed to comply with the mandatory procedure laid down u/s 144B - as alleged final assessment order u/s 147 r.w.s. 144B has been passed without providing a copy of draft assessment order as required u/s 144B(xxi) - HELD THAT - Indisputably, the aspect of non-service of draft assessment order, which was otherwise required to be sent along with show cause notice as per the procedure prescribed under Section 144B(1), clause (xvi)(b) of the Income Tax Act has been confirmed. The compliance of mandatory procedure as envisaged in the aforesaid provision ie. of issuance of show cause notice, the draft assessment order, the final assessment order and the consequential demand notice is no more res integra. The plain reading of the provisions of Section 144B of the Act, which provides for Faceless Assessment for determination to be carried out u/s143(3) and 144 envisages the procedure to be followed by the Authority. The plain reading of Sub-section (9) of Section 144B further provides that notwithstanding anything contained in any order provision of the Act, assessment made under Section 144(3) or Section 144 of the Act, shall be treated non-est, if such assessment is not made in accordance with the procedure laid down u/s 144B of the Act. Strict adherence of the aforesaid provision has been examined by this Court in the case of Sardar Co.Op. Credit Society Ltd. 2022 (4) TMI 1184 - GUJARAT HIGH COURT as held that final assessment order is not made in accordance with the procedure envisaged u/s 144 (xvi) (b) of the act as inspite of the variation being prejudicial to the assessee, no opportunity has been given to the assessee by serving show cause notice along with draft assessment order calling upon him to show cause as to why the proposed variation should not be made. Thus, we have no doubt in holding that the impugned order of assessment is invalid and nonest, passed in gross violation of principles of natural justice as well as mandatory provision in the form of section 144B. Thus impugned final assessment order issued by the respondent authorities is hereby declared as non-est and is quashed and set aside - demand notice issued by the respondent authorities u/s 144 of the Act against the writ applicant is also quashed and set aside.

Summary

Issues Involved:
1. Validity of the assessment order under Section 147 read with Section 144B of the Income Tax Act, 1961.
2. Compliance with the mandatory procedure under Section 144B of the Income Tax Act, 1961.
3. Principles of natural justice in the context of faceless assessment.

Summary:

1. Validity of the Assessment Order:
The writ applicant, an individual assessee, challenged the assessment order issued under Section 147 read with Section 144B of the Income Tax Act, 1961, and the corresponding demand notice dated 30.03.2022. The applicant argued that the assessment order was issued without following the mandatory procedures prescribed under Section 144B of the Act.

2. Compliance with Mandatory Procedure:
The applicant contended that the final assessment order was passed without providing a copy of the draft assessment order as required under Section 144B(xxi). The applicant emphasized that the National Faceless Assessment Centre must serve the draft order on the assessee if any variation prejudicial to the assessee's interest is proposed. The applicant was not served with the draft order, which deprived them of the opportunity to raise objections, resulting in a demand of Rs. 28,09,842/-.

3. Principles of Natural Justice:
The court noted that the non-service of the draft assessment order, which is required to be sent along with a show cause notice as per Section 144B(1)(xvi)(b), was confirmed. The court reiterated that compliance with the mandatory procedure under Section 144B is essential, and any assessment made without following this procedure is non-est. The court referred to previous judgments, including the case of Sardar Co.Op. Credit Society Ltd., which emphasized the importance of adhering to the principles of natural justice and the mandatory provisions of the Act.

Conclusion:
The court declared the impugned final assessment order dated 30.03.2022 as non-est and quashed it, along with the corresponding demand notice. The matter was remanded back to the Assessing Officer to issue a draft assessment order along with a show cause notice, in compliance with the provisions of Section 144B of the Act. The writ petition was allowed, and the rule was made absolute.